Bitcoin Loses Hashing Power Ahead of Hard Fork

Bitcoin has seen uninterrupted growth in hashing power- but ahead of the hard fork, a notable withdrawal of miners is observed, as block generation threatens to slow down and the mempool of transactions is growing.

In the past month, just as the Bitcoin price was setting records, the hashing power behind the coin seems to have dwindled. The slowdown does not look unusual when compared with the months past. But the sudden drop may be pointing to a trend of miners trying to redirect their efforts, as after November 16-18, most probably two Bitcoin blockchains would demand their attention, as well as Bitcoin Cash, which may be chosen as an alternative.

But there are signs that a withdrawal of miners is already affecting the Bitcoin blockchain. Block time has expanded to 15.2 minutes, instead of the targeted 10 minutes. In about 4 days, a downward difficulty adjustment is expected, -28.36%, a decrease unseen in the history of Bitcoin. The decrease coincides with the roughly 30% drop in hashing power to the lowest levels in two months. 

The situation resembles the Bitcoin Cash hard fork in August, which led to a much smaller downward difficulty adjustment. Since then, the hash rate has recovered- but the phenomenon of a miners' exodus is repeating, this time with bigger potential repercussions of depriving one blockchain of hashing power.

Bitcoin's hash rate has dropped from around 12 to around 9 PH/s. At the same time, mempool size, or pending transactions, are expanding again, along with fees, which are nearing the all-time high at an average of $6.  

All of these would be considered normal challenges, if they were not related to the contentious hard fork. 

In addition, there has been a proliferation of nodes supporting different versions of Bitcoin, and some believe the nodes have been recently created on Amazon AWS for the purpose of representing organic growth. Running a node is an intensive task, but the new nodes may be the work of only one entity.

AWS nodes are not the problem in themselves, and several other coins are using cloud services. But the proliferation of nodes to create an image of consensus or influence is seen by many as unfair play.

"Lately a lot of nodes supporting segwit2x have popped up in a decidedly inorganic way. Further analysis ... shows that these nodes are likely "sock-puppet" nodes spawned on Amazon cloud in order to astroturf support for s2x and to perhaps help their tattered network post-fork," wrote Reddit poster Pretagonist.

Others believe the newly created nodes may be contributing to the network congestion: 

As Bitcoin consolidates above $7,000, the behind-the-scenes problems are piling up, possibly complicating the aftermath of the hard fork.